Month: May 2011

Several years ago, I did an analysis averaging the results of a lot of contracts. Of course this varies site by site — for example, a campground with hookups obviously is going to have higher electricity costs than a campground without them. But the numbers have held up pretty well over time.

I have been disappointed with quality of analysis in some of the recent consulting studies that have come out in Arizona on parks and privatization. In particular, one study early this year interviewed something like 60 employees of various state and local government agencies on privatization — but not a single one of these 60 or their agencies had any experience with concession management of whole parks. It still puzzles me why the US Forest Service, which is right here in the state and has concession operation of whole parks in over 40 parks in Arizona, has apparently been ignored by every Arizona study on the topic.

Anyway, that is all water under the bridge. I recently saw a study by a group in the Utah legislature on parks and how to make their state parks more financially sustainable. While I quibble with some of it and would have done some things differently, it is one of the best public studies I have seen to date on this topic. It actually gets at the elephant in the room that most studies ignore (ie park employee compensation rates) and even addresses some more subtle issues that are often missed (eg. proliferation of law enforcement titles due to individual incentives to seek such titles rather than demand for law enforcement). I have linked the study below, which is a fairly large pdf.

Right now, our company and others are looking through the list to see if one or more would make viable candidates for private management. One lost opportunity here is that the best way to keep these parks open might be to group them in private management contracts with larger parks that are remaining open. This is what the US Forest Service does at 500 locations in California alone.

Last year the state closed or deeply reduced services in 150 state parks. The Legislature in March approved $11 million in cuts to state parks in the next fiscal year and $22 million in cuts in future years.

Friday, state parks officials announced the closure of 70 parks from among the 270-park unit system. The department said service reductions at the listed parks will begin this summer, with closures beginning in September and all listed parks closed by July 1, 2012.

With the state’s perpetually tight budget, funding for education, health care and the state’s powerful prison guards union usually get top priority, leaving parks typically out in the cold year after year. The state has let the parks deteriorate to the point that they now need $1 billion in repairs and maintenance, according to the California State Parks Foundation.

…There are private companies out there that will see California’s parks wasting away and envision a way to bring them back to life. Some facilities, like Tecopa Hot Springs County Park in Death Valley, operate under whole-park concession agreements, a remnant of California’s once-innovative past where the state leased some parks to private companies.

Under these lease agreements, recreation companies manage and maintain the parks. The government can set any quality and maintenance standards it desires and hold the private company accountable to them with a performance-based contract.

Phoenix, AZ – Adopting a public/private management strategy used successfully for decades by The U.S. Forest Service can ensure that endangered Arizona state parks remain open, are properly and professionally maintained, and are available to the public for years to come.

Due to the state budget crisis, millions of dollars allocated for parks operations were diverted to the state’s general fund. As a result, state parks are suffering, and three parks have closed, according to a member of the Arizona State Parks Board.

“We don’t have any money for fixing buildings, or fixing trails, or fixing bathrooms. We are in a desperate situation,” said Reese Wooding, of the state parks board, to the Tucson Weekly.

The fund cuts in the state budget are so drastic that the agency will have difficulty making payroll on July 1. A statement from The Arizona State Parks Foundation says the proposed 3.5 million in sweeps, “May be fatal to a system on the verge of collapse.”

“It doesn’t have to be this way,” says Warren Meyer, president of Phoenix-based Recreation Resource Management (RRM), a $10M company that manages public parks and recreation areas throughout the U.S.

“With a public-private partnership model used by the US Forest Service (USFS) for thirty years and in over 40 federally-owned parks in Arizona alone, the government retains ownership of the land and control of the use and character of the park while handing over operational tasks that are time, money, and labor intensive to a more cost-effective private company.”

“While these operational tasks by no means constitute all the work required to keep parks open, they account for the vast majority of the money spent by the state parks organization in the field,” says Meyer.

“In these contracts, private concessionaires pay for all these costs solely out of the gate fees paid by the public, without further taxpayer subsidy. We pay the public agency a concession fee of 5 percent to 25 percent of park revenues, often converting a money-loser to a moneymaker for the government.”

In these arrangements, the public agency maintains the land in the condition and character the public expects.

“This USFS program is already working in over 40 locations in Arizona,” states Meyer.

“Our expertise combined with an excellent cost position allows us to make the best possible use of the gate fees paid by the public. In the 35 Arizona public parks we manage, this efficiency stretches the gate fees paid by the public so we can continue to invest in needed maintenance and repair.”

“Over the last few years, our company, guided by the Forest Service’s wish lists, have invested in improvements such as new composting rest rooms at Crescent Moon, new shower buildings at Cave Springs and Pinegrove campgrounds, renovations to the Oak Creek Visitor Center, and ADA enhancements at nearly every facility,” says Meyer.

In part because of this attention to keeping facilities clean and in good repair, the public parks RRM operates are consistently ranked among the Top 100 Family Campgrounds in America since 2003, and are recognized as among the best in the state by third-party reviewers such as Sunset Magazine and CampArizona.com.

Many public agencies considering such partnerships worry that this approach might not be applicable to their smaller parks. Allaying this concern, the USFS in Arizona, in order to keep parks open, is successfully bundling large and small parks together in contracts for a general geographic area. The parks are kept open using economies of scale, where profits from more lucrative properties are passed on to the less profitable locations

“The goal of such concession arrangements,” said Meyer “is to keep these special pieces of land beautiful, accessible and available to the public for generations. The objective is to form a partnership combining the public oversight and unique environmental knowledge of the state parks agency with the efficiency and customer service of a private company that can clean and maintain the parks without the need for a taxpayer subsidy. In doing so, we can help achieve financial sustainability for the public parks system.

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Fact Sheet – Public-Private Partnerships for Parks

How it works

The public retains ownership of the land. Private companies must maintain the desired character and facilities in the park. Typical concession agreements include extremely detailed operational requirements and restrictions.

The private company takes on operational tasks (from maintenance to bathroom cleaning) that consume much of the state parks budgets but don’t impinge on these strategic tasks.

Private company’s expenses, and therefore most park operations expenses, are paid out of park visitor fees without any additional payments from the state. In return for retaining these user fees, the company pays a competitively-bid rent to the state.

The state may use this rent to help cover its other expenses, or may reinvest the rent, as does the US Forest Service, in catch-up maintenance and park improvements.

Advantages

The substantially lower cost position of private companies allows park operations as well as major maintenance to be performed using existing visitor fees without taxpayer subsidies. For example, the 35 USFS parks run by RRM in Arizona are up to date on their maintenance, while AZ state parks have years of deferred maintenance in their parks.

More efficient management also allows for lower use fees – for example, while Slide Rock SP summer day use rates rose to $20 last year, RRM lowered the day use rates at neighboring public parks it operates from $10 to $9.

Private concessionaires have incentives that are well-matched to the public – they make money only if happy and satisfied visitors come back to the park. As a result, the parks operated in AZ by RRM receive very high marks from customers and in third-party surveys such as CampArizona.com. In fact, per dollar of revenue paid by visitors, RRM typically has more people actually working in the parks to serve visitors than does most state parks agencies.

If the public agency wants to improve the facilities in parks, private companies can be a critical source of capital. RRM has invested in new facilities requested by the US Forest Service in a number of Arizona parks (from shower buildings near Sedona and Flagstaff to completion of the Oak Creek Visitor Center), and have invested more than $3 million across the country helping parks catch up with deferred maintenance and improve the visitor experience.

Even smaller parks can benefit from this model – the US Forest Service has learned to combine small, financially-challenged parks with larger more successful parks -creating regional bundles. There are six successful bundling areas in Arizona to ensure quality management of smaller parks. They are: Sedona/Oak Creek Canyon, Flagstaff, Payson, Mount Lemmon near Tucson, and properties around Kaibab and Show Low. Of the 35-plus sites Meyers runs, only perhaps seven could make money on their own.

“Others make money because they are grouped with other parks,” he said. “In other words, they would lose money as a stand alone but make money in a group because they benefit financially from sharing a manager, equipment, reporting, and excellent operational practices.”